Automotive revolution – perspective towards 2030

Automotive revolution ? perspective towards 2030

How the convergence of disruptive technology-driven trends could transform the auto industry

Advanced Industries January 2016

Introduction

Today's economies are dramatically changing, triggered by development in emerging markets, the accelerated rise of new technologies, sustainability policies, and changing consumer preferences around ownership. Digitization and new business models have revolutionized other industries, and automotive will be no exception. For the automotive sector, these forces are giving rise to four disruptive technology-driven trends: diverse mobility, autonomous driving, electrification, and connectivity.

Most industry players and experts agree that these four technology-driven trends will reinforce and accelerate one another, and there is general consensus that the industry is ripe for disruption. Yet although the widespread sentiment that game-changing disruption is already on the horizon, there is still no integrated perspective on how the automotive industry will look in 10 to 15 years as a result of these trends.

With this publication we aim to make the imminent changes more tangible. We start from the general consensus that the industry is transforming and go further to specify and quantify the magnitude of change. The forecasts in this study should, thus, be interpreted as a projection of the more probable assumptions across all four trends, based on our current understanding. The forecast methodology is certainly not deterministic in nature (Text box 1), but should help industry players better prepare for the uncertainty by discussing potential future scenarios (Text box 2).

Text box 1: The methodology behind "Automotive revolution ? perspective towards 2030"

Research on the future of mobility conducted in collaboration with Stanford University

Substantial industry-wide research covering perspectives from incumbents, new entrants, start-ups, academia, as well as investment and legal firms

Extensive executive interviews and in-depth discussions with over 30 industry experts in Asia, Europe, and the United States

A proprietary quantitative market model integrating macroeconomic development, future mobility behavior, electric vehicle and autonomous vehicle diffusion

There are many tough, fundamental, or even existential questions that are looming for automakers and suppliers. Some commentators suggest these disruptions will mark the decline of the automotive industry. But in our view, growth in the personal mobility market will accelerate as new sources of recurring revenues supplement slowing growth from onetime vehicle sales.

Automotive revolution ? perspective towards 2030

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Text box 2: Overview of the high-disruption vs. the low-disruption scenario

Diverse mobility City policies discouraging private vehicles New, on-demand business models Modal shift away from car ownership to shared mobility Autonomous driving Regulatory challenges are overcome Development of safe and reliable technical solutions Consumer acceptance and willingness to pay Electrification Battery prices continue to decline Regulator-driven emission restrictions Consumer demand for electrified powertrains Connectivity Uptake of car connectivity globally Consumers regularly using paid content

High

Low

Intensified Prevalent Significant

Steady Limited Limited

Fast

Gradual

Comprehensive Incomplete

Enthusiastic

Limited

Rapid Intensified Widespread

Protracted Gradual Restrained

Vast majority Mainstream

Partial Limited

We drafted eight key perspectives on the "2030 automotive revolution" to provide insights into the kind of changes that are coming and how they will affect traditional OEMs and suppliers, potential new players, regulators, consumers, national car markets, and the automotive value chain.

Shifting markets and revenue pools

1. Driven by shared mobility, connectivity services, and feature upgrades, new business models could expand automotive revenue pools by ~30 percent, adding up to ~USD 1.5 trillion.

2. Despite a shift towards shared mobility, vehicle unit sales will continue to grow, but likely at a lower rate of ~2 percent p.a.

Changes in mobility behavior

3. Consumer mobility behavior is changing, leading to up to one out of ten cars sold in 2030 potentially being a shared vehicle and the subsequent rise of a market for fit-for-purpose mobility solutions.

4. City type will replace country or region as the most relevant segmentation dimension that determines mobility behavior and, thus, the speed and scope of the automotive revolution.

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Automotive revolution ? perspective towards 2030

Diffusion of advanced technology

5. Once technological and regulatory issues have been resolved, up to 15 percent of new cars sold in 2030 could be fully autonomous.

6. Electrified vehicles are becoming viable and competitive; however, the speed of their adoption will vary strongly at the local level.

New competition and cooperation

7. Within a more complex and diversified mobility industry landscape, incumbent players will be forced to simultaneously compete on multiple fronts and cooperate with competitors.

8. New market entrants are expected to initially target only specific, economically attractive segments and activities along the value chain before potentially exploring further fields.

Based on our analysis of these eight perspectives, which are explained in more detail in the following four chapters, we believe incumbent players need to make fundamental and strategically vetted decisions now to shape the industry's future by preparing for uncertainty, leveraging partnerships, adapting the organization, and reshaping the value proposition.

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